Bank Account for a Blockchain Company

Introduction

Many of you might have heard about the cur­rent strug­gle that com­pa­nies deal­ing with blockchain and cryp­tocur­ren­cies are faced with when try­ing to open a Bank account. Most of our clients ask whether the process is still the same and what are the main require­ments to ulti­mate­ly have an oper­a­tive Bank account.

If you have a com­pa­ny deal­ing with blockchain or cryp­tocur­ren­cies, you would need a Bank Intro­duc­er. The scope of this intro­duc­tion is to assist the client by refer­ring a pos­si­ble bank­ing part­ner that will be able to enter­tain their company’s line of busi­ness.

DWP have agreed to refer a pos­si­ble bank­ing part­ner to the client, that is work­ing with­in the indus­try and has expressed inter­est in accept­ing cryp­to asset relat­ed busi­ness cas­es. DWP ensures that such bank­ing part­ner is suit­ably licensed to pro­vide such ser­vice to the client.

To begin with, we need to dis­tin­guish between PSPs and Banks. Pay­ment Ser­vice Providers (PSPs) pro­vides the facil­i­ty of a wal­let to be able to pay and receive the funds in that wal­let. It is an online ser­vice which requires the same lev­el of due dili­gence as a bank and adopt the same pro­ce­dures. How­ev­er, PSPs tend to be more open for this sphere. On the oth­er hand, a Bank is a finan­cial insti­tu­tion that per­forms the deposit and lend­ing role through a phys­i­cal Bank account. It also pro­vides clas­si­cal bank­ing ser­vices such as Debit/ Cred­it Card, ATMs, cheque books, trans­fers, for­eign exchange ser­vices, over­drafts and loans.

First Steps for Opening a Bank Account

The process of open­ing an account may take approx­i­mate­ly 3–4 months. The process for a Bank intro­duc­tion with our com­pa­ny starts by the inter­nal on-board­ing process which on aver­age may take 1–2 weeks, depend­ing on the respon­sive­ness of the client.

Dur­ing this process, due dili­gence is car­ried out on the involve­ments of the com­pa­ny. At this stage, the line of busi­ness of a com­pa­ny is to be estab­lished to deter­mine whether the com­pa­ny is deal­ing with blockchain and/or cryp­tocur­ren­cies.

Why is this impor­tant? As many of you might know, few are the banks that are con­sid­er­ing such lines of busi­ness with­in their risk para­me­ters, and thus we take into con­sid­er­a­tion dif­fer­ent types of insti­tu­tions to reach the client’s goal, that of open­ing an account with a finan­cial insti­tu­tion.

As part of the inter­nal process, due dili­gence is car­ried out on the involved per­sons such as direc­tors, share­hold­ers and the com­pa­ny sec­re­tary where­by doc­u­ments are request­ed in line with the FIAU Imple­ment­ing Pro­ce­dures and inter­nal poli­cies and pro­ce­dures. Such doc­u­ments will also be used by the Bank­ing Facil­i­ty Man­ag­er of DWP to ini­ti­ate the process of open­ing a Bank account.

Once the inter­nal on-board­ing is cleared, the next step would be the set­ting up of the com­pa­ny, which needs to be incor­po­rat­ed and to also be con­sid­ered as a tax res­i­dent in Mal­ta.

It is impor­tant to note that the com­pa­ny does not need to be licensed before open­ing a bank account.

A Bank account for a blockchain com­pa­ny is not a walk in the park. One would need to exam­ine dif­fer­ent Banks and PSPs to see which are the most suit­able that par­tic­u­lar cus­tomer. The Bank would need to clear­ly under­stand the line of busi­ness of the com­pa­ny and thus it is of utmost impor­tance to exam­ine dif­fer­ent sce­nar­ios before approach­ing a par­tic­u­lar Bank or PSP.

What are Banks really looking for

Every Bank and PSP is dif­fer­ent, but some require­ments are com­mon.

Juris­dic­tion: Apart from the Line of Busi­ness of a Com­pa­ny, the insti­tu­tions are inter­est­ed in the juris­dic­tions involved. You may think that any juris­dic­tion may be accept­able, but the bank may con­sid­er some juris­dic­tions as high risk. For this rea­son, the Bank will ask for the cus­tomers and the sup­pli­ers of a com­pa­ny, even if they are still to be con­sid­ered as prospec­tive.

Flow of Funds: You may be ask­ing why is this impor­tant. Well, the Bank will con­sid­er open­ing a Bank account only if it is con­fi­dent enough that the com­pa­ny is not shady. In this respect, they would need to deter­mine the flow of funds of the com­pa­ny, that is from where the com­pa­ny is to receive funds and to where such funds are to be trans­ferred. These are also known as the inflows and out­flows of funds, which need to be clear and trans­par­ent.

Sub­stance: Anoth­er thing that the banks are look­ing for when onboard­ing a new cus­tomer is the sub­stance in Mal­ta. Cer­tain Banks regard a reg­is­tered office and the res­i­dence of the direc­tor and/or the ulti­mate ben­e­fi­cial own­er as ade­quate sub­stance in Mal­ta. How­ev­er, most of the insti­tu­tions do not stop there.

There are banks that for a Bank account open­ing, the com­pa­ny would need to have a phys­i­cal office here in Mal­ta and also would need to have employ­ees in that phys­i­cal office. Real­i­ty is that the more sub­stance there is, the more like­ly it is to be accept­ed as a client. The Banks will take into con­sid­er­a­tion that a com­pa­ny with a lot of sub­stance in Mal­ta would have already been at the scruti­ny of Mal­tese Author­i­ties, and that is a plus.

Ben­e­fi­cial Own­er: The insti­tu­tions also look for detailed infor­ma­tion about the ben­e­fi­cial own­er ( nat­ur­al per­son hold­ing 25%+1 of shares with­in the com­pa­ny). It is impor­tant that a ben­e­fi­cial own­er of a com­pa­ny where its trad­ing activ­i­ties are in rela­tion to blockchain has rel­e­vant expe­ri­ence in rela­tion to the line of busi­ness. In this regard, the insti­tu­tions are inter­est­ed in the lev­el of edu­ca­tion and the expe­ri­ence of the ben­e­fi­cial own­er.

Source of Wealth & Source of Funds: Impor­tance is also giv­en to the source of wealth and the source of funds. With regards to the source of wealth, insti­tu­tions require a dec­la­ra­tion of the total net worth via a source of wealth dec­la­ra­tion. The Banks are also inter­est­ed on how the net worth of that par­tic­u­lar indi­vid­ual was gen­er­at­ed.

Also, regard­ing to the source of funds, insti­tu­tions are inter­est­ed in the first trans­ac­tion to be hit the account once it is opened or how the client start­ed the invest­ment in the com­pa­ny. Banks need to know how the share cap­i­tal has been gen­er­at­ed since it is a sub­stan­tial amount, and proof needs to be pro­vid­ed.

Out­sourc­ing: The Banks are also inter­est­ed in which part of the prod­uct or ser­vice is being out­sourced. They will also ask for agree­ments with third par­ties, even if it these are not yet avail­able they will ask for draft­ed agree­ments.

Mar­ket­ing: Some Banks may also go into fur­ther detail and will be inter­est­ed to know on how the service/product of the com­pa­ny is to be pro­mot­ed and which mar­ket­ing tool is to be used. They will be intend­ing to iden­ti­fy the lev­el of expe­ri­ence of the pro­mo­tors and also to know whether the mar­ket­ing team is also famil­iar with the company’s line of busi­ness.

Conclusion

Malta’s bank­ing sec­tor is very aware of the mit­i­ga­tion of risks when deal­ing with new tech­nolo­gies. Cur­rent­ly, there is a strug­gle that com­pa­nies deal­ing with blockchain and cryp­tocur­ren­cies are fac­ing when try­ing to open a Bank account, how­ev­er it is not impos­si­ble to do so. DWP strives to assist its clients by refer­ring pos­si­ble bank­ing part­ners that will be able to accept a company’s line of busi­ness, even when deal­ing with blockchain and cryp­tocur­ren­cies.

Dis­claimer*

The above-men­tioned arti­cle is sim­ply based on inde­pen­dent research car­ried out by Dr. Wern­er and Part­ner and can­not con­sti­tute any form of legal advice. If you would like to meet up with any of our rep­re­sen­ta­tives to seek fur­ther infor­ma­tion, please con­tact us for an appoint­ment.

Dr Rebec­ca Mif­sud, born 6th May 1994, attend­ed the Uni­ver­si­ty of Mal­ta and is an LLB Hon­ours grad­u­ate. She also grad­u­at­ed in the Mas­ters in Advo­ca­cy and will be sit­ting for her Mal­ta War­rant Exam in 2019. She suc­cess­ful­ly defend­ed her dis­ser­ta­tion enti­tled: ‘Imput­ing respon­si­bil­i­ty for foot­ball injuries inflict­ed by minors in the Mal­tese sce­nario,’ in 2017.